UPDATE 1-Mexico 2018 budget eyes primary surplus, ups 2017 GDP outlook

(Adds details on budget plan)

MEXICO CITY, Sept 8 (Reuters) - Mexico’s finance ministry projected a further drop in its public borrowing requirement next year while raising its growth forecast for this year as it presented its 2018 budget proposal on Friday.

The government is this year on track to post its first primary surplus in nearly a decade after it cut spending to contain a deficit splurge that threatened Mexico’s credit rating.

Now policymakers say they can slow the pace of budget cuts in 2018 and still get the country’s debt burden on a downward trajectory.

The finance ministry’s plan projects a primary budget surplus of 0.9 percent of gross domestic product in 2018. That follows what is this year projected to be the government’s first such surplus since 2008, or one of 0.4 percent of GDP.

The primary budget surplus excludes interest payments on past debts. The budget projects that the total public sector borrowing requirement will fall from 2.9 percent of GDP in 2017 to 2.5 percent next year.

Both Standard & Poor’s and Fitch Ratings removed a negative watch on Mexico’s sovereign credit this year following recent spending cuts and an improved growth outlook.

Finance Minister Jose Antonio Meade said Latin America’s No. 2 economy was growing faster than expected this year, and he raised the government’s economic growth forecast for 2017 to between 2.0-2.6 percent from 1.5-2.5 percent.

Speaking at the lower house of Congress where he handed in the government’s 2018 budget proposal, Meade said the economy would grow between 2 and 3 percent next year. (Reporting by Sharay Angulo; Editing by Alistair Bell)